Zomato hopes to dominate the Indian instant delivery market by acquiring Blinkit.
Online food-delivery provider Zomato is in talks with Blinkit about a potential buyout in a share-swap deal. This follows Zomato’s $100 million investment in the Gurgaon-based quick-commerce business last year, in which it acquired a roughly 10% interest.
While the details of the sale are still being worked out, it is believed that Zomato stockholders would get 10 Blinkit shares for each share held in their firm, according to the sources.
Based on Zomato’s current market capitalization, Blinkit is worth roughly $700–800 million. This is less than the previous valuation of Blinkit, which was little more than $1 billion.
Meanwhile, in an exchange filing on Tuesday, Zomato said it would provide a loan of up to $150 million to Grofers India Pvt Ltd, Blinkit’s Indian subsidiary. Interest will be paid at a rate of 12% per year, with a maximum term of one year.
The planned share swap arrangement would give SoftBank Vision Fund, Blinkit’s largest investor, a stake in the meal delivery company. In addition, Tiger Global, an existing investor in Zomato, plans to boost its investment.
Interestingly, SoftBank made a $450 million investment in Zomato’s competitor Swiggy last year. The Japanese firm is anticipated to acquire a 4–5 percent interest in Zomato as part of the agreement.
The conversations of selling Blinkit come at a time when the firm is still facing intense competition in the quick-commerce industry and is trying to achieve market share.
Swiggy started last year that it will invest $700 million in its Instamart business, while Mumbai-based Zepto has amassed a $160 million war fund. Dunzo has also received $240 million from Reliance Retail to focus on this area, with pilots being done with Ola.
“It’s odd that Zomato is making these investment bets when there is still more money to be earned by investing in their core activities (given the vast base), It was lucrative when Info Edge (Zomato’s investor) began investing in new-age enterprises. With the present stock market disaster, there is pressure on these (tech) equities to perform. An investment plan can serve as a short-term diversion for investors, but in today’s market conditions, it must first demonstrate profitability.”
said Ajay Garg, managing director of Equirus Capital, an investment bank.
If the deal goes through, Zomato would quickly dominate the Indian instant delivery sector.
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